FOR IMMEDIATE RELEASE

Helena, Montana — James Brown, Montana State Auditor and Commissioner of Securities and Insurance, announced today that the Montana Commissioner of Securities and Insurance (CSI) has joined a task force of state securities regulators and the United States Securities and Exchange Commission (SEC) in a $106 million settlement with Vanguard Marketing Corporation (VMC) and The Vanguard Group, Inc. (Vanguard). The settlement addresses Vanguard’s failure to properly supervise certain registered individuals and disclose potential tax consequences to investors after changes were made to the investment minimums for certain target date retirement funds.

This settlement follows a comprehensive three-year investigation coordinated through the North American Securities Administrators Association’s Enforcement Section Committee (NASAA), in parallel with a concurrent SEC investigation.

The investigation found that in 2020, Vanguard lowered the investment minimums for its Institutional Target Retirement Funds (TRFs). As a result, many retirement plan investors redeemed shares in the Investor TRF to purchase Institutional TRF shares. This large-scale shift led Vanguard to sell highly appreciated assets in the Investor TRF, triggering significant capital gains taxes for hundreds of thousands of retail investors who remained invested in the Investor TRF. Vanguard failed to disclose the potential tax implications to these investors due to the migration of shareholders from the Investor TRF to the Institutional TRF.

Commissioner Brown stated, “This settlement underscores the importance of holding financial institutions accountable for their actions, especially when those actions affect the retirement savings of hard-working Montanans and investors nationwide. The CSI is committed to working alongside other state regulators and the SEC to ensure that firms operating in Montana—and across the nation—are held to the highest standards of transparency and investor protection.”

The Vanguard Group, Inc., the parent company of Vanguard Marketing Corporation (a FINRA and state-registered broker-dealer), markets and sells target retirement funds to investors in tax-deferred and taxable accounts. Historically, capital gains distributions for Investor TRF shareholders have been modest. However, in this case, the redemptions resulted in a substantial tax liability for investors. The SEC will notify impacted investors and administer remediation payments through its Fair Fund program to compensate those who incurred capital gains taxes.

For inquiries, please contact David Sanders, CSI Communications, at 406.444.3778 or dsanders@mt.gov.

The Montana State Auditor, Commissioner of Securities and Insurance, oversees the regulation of insurance and securities industries in Montana. The State Auditor is also an ex officio member of the Montana Board of Land Commissioners. James Brown was elected State Auditor in 2024.

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